Great Depression Causes/Transcript
Transcript Text reads: The Mysteries of Life with Tim and Moby Moby works at a laptop while a stock ticker scrolls on the wall behind him. Tim enters the room. MOBY: Beep. Beep. TIM: Hey, Moby, how's the day trading going– MOBY: Beep. Moby keeps typing. TIM: Dad wanted to know if you were coming down for breakfast. Tim reads from a typed letter. TIM: Dear Tim and Moby, What was the Great Depression? From, Addy. The Great Depression was a big economic slump in the 1930s. Images show a factory, a sack of money, and a house. TIM: Many Americans lost their jobs, their savings, and their homes. But it wasn't just in the U.S. The business slump affected the entire world. MOBY: Beep. An animated graph of stock values shows them plummeting fromover three trillion to under one trillion. TIM: Yeah, Black Tuesday, when the New York Stock Exchange crashed in 1929, marked the start of the Great Depression. But most historians and economists agree that the stock market crash was just one of many contributors to the slump. It was really more of a sign that things had already gone wrong. To understand the Depression's causes, we have to go further back. The animated graph shows stock market values rising. TIM: The 1920s were a time of great economic and technological growth in America. World War I had just ended, and Americans were ready to take a break from the anxiety of world politics. During this time, known as the Roaring Twenties, Americans were focused on making money and having fun. An animation shows an automobile assembly line. A man drives out of the factory in a new car. A sign on the factory has the words "Army Planes" crossed out and now reads, "Beautiful Cars." TIM: Factories built to make weapons and ammunition for the war were retooled to churn out consumer products. People rushed to spend the money on cars, radios, telephones, and other new technologies. An image shows a man and woman holding money. Another image shows two women wearing stylish dresses in front of a movie theater. The theater's sign reads, "The Jazz Singer." TIM: Movies became a popular form of entertainment, and jazz music swept the land. MOBY: Beep. TIM: Well, it doesn't tell the whole story. For one thing, a large segment of the population never got to share in all that prosperity. An image shows a man selling apples on the street. A sign shows the price of his apples dropping from fifteen cents to one cent. TIM: For instance, after the war ended, American farmers had a difficult time making profits. An animation shows a man working on a factory assembly line. A well-dressed manager walks behind him pushing a cart full of money. TIM: Hard times had hit other major parts of the economy, too, including energy, coal mining, railroads, shipbuilding, and textiles. America was actually more productive than ever, but the gap between the rich and the poor just kept growing. Many manufacturers were turning huge profits, but most of that was going to the management, not the workers. An animation shows working-class man in a luxury car driving past a mansion. TIM: Without the cash to buy all those neat new gadgets like cars and radios, consumers relied on another new invention: credit. Americans were saving less and spending money they didn't have. An animation shows a line of men entering the car factory with bags of money, and driving off in new cars. Then the men start to disappear, and the cars come out of the factory and pile up because no one is buying them. TIM: They were even borrowing money to invest in the stock market. That helped inflate stock prices well above what they were actually worth. Finally, reality set in. The only way the economy could keep growing was if there were people to buy the products coming out of the factories. But Americans had built up so much debt, they just couldn't buy any more. The animated graph of the New York stock market shows stock values falling. TIM:That led to factories shutting down, unemployment, and of course, a crash in stock prices. MOBY: Beep. A split image shows six cars on one side, and one man with a bag of money on the other. TIM: Well, economies naturally go through periods where there is more supply of products than demand. When that happens on a widespread level, you've got a recession, a period where the economy shrinks. There are lots of possible reasons for why the 1929 slowdown turned into a full-fledged depression, which is a longer, more severe recession. An animation shows men and women walking out of a bank, carrying sacks of money marked "loan" on them. TIM: For one thing, American banks had been making risky loans throughout the 20s. An image shows the Federal Reserve bank. TIM: When borrowers were unable to repay their loans, some banks failed. There was also literally less money to go around, and the Federal Reserve, America's central bank, didn't do anything about it. An animation shows people lining up to get into a bank. The bank's “Open” sign quickly changes to “Closed.” TIM: People everywhere started freaking out. They rushed to local banks to withdraw their money while they still could. When that happened, banks across the country went under and had to close, causing thousands of people to lose their life savings. TIM: Many historians also fault Herbert Hoover, the President in 1929, for making things even worse. An image shows Herbert Hoover. An image shows a man holding an Internal Revenue Service tax bill. TIM: He thought the key to ending panic was balancing the government's budget, so he raised taxes. That made consumers even less likely to spend, and businesses less likely to risk money on expansion. An animation shows a windy, dry landscape and a farmhouse. TIM: Finally, a ten-year drought hit the Great Plains in 1930, putting even more pressure on farmers. MOBY: Beep. An animation shows an assembly line in a factory where military tanks are made. TIM: Well, most historians agree that massive government spending in preparation for World War II pulled America out of the Depression in the early 1940s. An animation shows Uncle Sam’s hand putting money into the hands of citizens. TIM: So today, when the economy slows, the government generally spends. It gives money back to Americans through tax cuts and financial support. An animation shows the bank giving fifty dollars to a family. The family pays back the fifty dollars plus four dollars of interest. The interest rate then drops to one dollar. TIM: And the Federal Reserve lowers interest rates, making it cheaper for people to borrow money. Images show an exchange of money from one hand to another, money being paid to a merchant, and a graph showing economic growth. TIM: When people and businesses can borrow money easily, they're more likely to spend it and keep the economy humming along. TIM:That policy has kept recessions from turning into depressions ever since. Also, the Federal Deposit Insurance Corporation now insures people's bank deposits up to two-hundred-fifty thousand dollars. Tim answers a telephone. TIM: Hello? It's for you. The Securities and Exchange Commission. Something about suspicious trading patterns. The stock ticker reads "News Flash, X-Corp Announces 3rd Quarter Losses!" MOBY: Beep. Moby puts his hands over his mouth. He walks away. Moby runs away through the broken window. MOBY: Beep. Beep. Category:BrainPOP Transcripts